What is Usury?
Usury is the act of lending money at an unreasonably high interest rate. It also occurs when lenders charge excess interest or interest that is higher than the rate permitted by law.
What are Usury Laws?
Usury laws vary among states, and each state will determine its usury laws and which types of loans it applies to. The rate permitted by state usury laws depends on the type of loan, the size of the loan, and the type of individual or entity making the loan.
Florida defines usurious transactions as:
- A loan;
- A line of credit;
- An advance of money or other obligation in which a lender charges an interest rate in excess of 18 percent on amounts up to $500,000; or
- An advance of money or other obligation in which a lender charges an interest rate of more than 25 percent on amounts in excess of $500,000.
Though credit cards have high interest rates, they normally do not fall under usury laws.
What Happens to a Loan Agreement if the Interest Rate is Usurious in Florida?
The penalties for violating usury laws vary by state. In Florida, the consequences of a usurious loan are severe. The loan may become unenforceable in whole or in part. Additionally, the lender forfeits all interest charged on a usurious loan, and the lender may be liable to the borrower for double the amount of interest charged on a criminally usurious loan. A criminally usurious transaction is a transaction knowingly made and unauthorized or not permitted by law. Upon being considered criminally usurious, a debt is not only forfeited but also unenforceable. Lastly, the lender may be liable for the borrower’s attorneys’ fees.